With around 18% of market share of credit card industry in terms of outstanding credit cards and total credit card spends as of 30 September, 2019, SBI stands as the second largest credit card-issuer in India.
It is a subsidiary of largest bank of India in terms of parameters like Number of branches, deposits and advances. It came into action in 1998 and it has proved to stand out on the foundation of trust and transparency.
Focusing on monetizing the ever changing demographics and economic conditions of the country, it has shown growth results better than the whole credit card industry in India when judged on the parameters of outstanding cards and spends through the credit cards.
Over the SBI brand cards, it also provide co-brand credit cards and right now is the largest in the co-brand card league of service providers. Having partnerships with the service providers of a wide spectrum gives SBI cards an extra advantage namely IRCTC, Apollo Hospitals, OLA Money and many more.
Talking about the technology implied in the background, it is truly a strong one as using data analytics to collect the sample space of various data points such as purchase pattern, history and behavior of the user helps it to render the utmost services in the sector. Artificial Intelligence and Automation are also the key attributes of a strong technology support.
Distribution model comprises of a diversified customer acquisition network controlled by a sales force of 33,086 outsourced sales personnel spreading out in 133 Indian cities and with access to SBI’s extensive network of 22,007 branches across India, which enables it to market its credit cards to SBI’s vast customer base of 436.4 million customer.
Dual facet revenue model including both non-interest income (primarily comprised of fee based income such as interchange fees, late fees and annual fees, among others) as well as interest income on credit card receivables and steady revenue figures supports a reliable financials.
Expertise in industry and track record of solid financials
Being the second largest credit card-issuer as per the report of RBI, SBI card holds a very foundationally strong background which advocates its expertise in the concerned industry and such claims are more solidified when it comes to company’s financials.
Multi- facet customer acquisition
Acompained by the open market acquisition, SBI cards has an advantage of the extensive customer network support of SBI. Such distribution model makes it possible for SBI cards to outperform from its competitors.
Strong brand value and promoter
SBI cards has proved to be a trustful name in the sector which is contributed by the service quality and experience in the field. Moreover, the promoter like SBI has provided all the required support for the company to flourish.
Wide spectrum of card offerings and industrial exposure
SBI offers a wide variety of credit cards to fulfill the personalized requirements of all of its existing and potential customers. Ranging from individual to corporate card holders, it works on the classified distribution dedicatedly. Partnership with industrial majors renders solutions sector wise.
Risk management with data analytics support
Data analytics is one of the strongest modern technology which makes it possible to manage the obvious risk to minimal levels via working on both volume and frequency aspects. Analyzing the data points to monitor the credit operations adds an extra attribute to its portfolio.
Robust technology expansion
From fiscal 2017 to fiscal 2019, it invested ₹519.88 million in core technology systems and in building brand new peripheral applications, such as online customer acquisition, online servicing, customer relationship management, fraud management and credit risk applications
Experienced and skillfull management team
Management team makes the fundamentals of the company strong. SBI cards has an experienced and skillful team of management. Many key persons of the company have proved to be loyal and dedicated for the company.
Extending the customer acquisition reach
Focusing more on tier 1 and tier 2 cities of India will actually offer more open market physical points for sale in the lesser penetrated area of market. As well as entering into new co-brand partnerships will increase the customer acquisition further.
Targeting the untapped sectors
Entering into more untapped categories of credit cards will boost the reach of its services namely super premium category is still a future prospect for the company, where the hopes of sustainable growth is firm.
Playing in the volume market
For boosting the quantity of the transactions , SBI Cards planning to offer more cashback rewards, bonus points and merchant discounts. Moreover, collaborating with more payment platforms can actually escalate the volume.
Risk management and assured quality experience
Implying data analytics tools to minimize the risk involved in card transactions for making the customer experience and data security better. Deploying technologies like artificial intelligence and machine learning capabilities into customer acquisition, portfolio management and transaction monitoring models can enrich the customer experience.
Set forth below are details of Shareholders holding 1% or more of the paid-up share capital of Company as on the date of this Draft Red Herring Prospectus.
|Shareholder||No of Equity shares of face value of Rs 10 each held||Percentage of Equity share capital held(%)|
|State Bank of India||689,927,368||74%|
|CA Rover Holdings||242,406,915||26%|
The object of the Offer for Sale is to allow the Selling Shareholders to sell an aggregate of up to [●] Equity Shares held by them. Our Company will not receive any proceeds from the Offer for Sale.
The net proceeds of the Fresh Issue, i.e. Gross proceeds of the Fresh Issue less the Offer Expenses apportioned to our Company (“Net Proceeds”) are proposed to be utilised for augmenting our capital base to meet our future capital requirements.
Retail credit growth to continue on a strong footing
According to CRISIL Research, retail credit, including domestic bank and non-bank credit, is expected to double over the next five years to Rs. 117.0 trillion as of fiscal 2024.
As the figure below depicts, India’s overall credit penetration in the economy measured by its domestic credit as proportion of GDP is one of the lowest as compared to other countries.
However, this ratio has been increasing at a faster rate with increase in formalization, rise in income levels and improving banking penetration in the country. This is further supported by strong retail focus by banks as this segment offers better risk-to-reward.
Unsecured loans expected to grow at a faster pace than retail credit growth
Unsecured loans, which comprise of credit cards, personal and consumer durables loans, is a strong growth driver of retail credit.
Compared to retail credit, unsecured loans have grown at a faster pace in India at a CAGR of 28.0% to reach approximately 5.0 trillion unsecured loans as of fiscal 2019.
According to CRISIL Research, approximately 25.0% of new card additions in fiscal 2019 were to new-to-credit customers.
Moreover, CRISIL Research expects the unsecured loan market in India to continue expanding to reach approximately Rs. 14.4 trillion by fiscal 2024, as depicted in the figure below.
Discretionary spending, has grown at a CAGR of approximately 12.0% between fiscals 2014 and 2019; increasing credit penetration has grown at a CAGR of 32.0% between fiscals 2014 and 2019.
Credit cards expected to grow at the fastest rate as part of the unsecured loans market
The figure below depicts the breakdown of the different segments in the unsecured loan market.
According to CRISIL Research, credit cards outstanding is forecast to grow at the fastest pace of 23.0% CAGR over the next five years, driven by the rising issuance of cards in smaller cities, increasing organized retail penetration and growth in payments infrastructure. Personal loans and consumer durables are also expected to log strong growth of 20.0% to 22.0% and 19.0% to 21.0% over the next five years, respectively.
Minor crimes related to personal loans and credit cards has remained almost stable over the last three years
As of fiscal 2019, personal loans and credit cards delinquency has remained almost stable over the last three years, as depicted in the figure below.
|Product (as of March 31, 2019)||Delinquency Level|
0.5 – 0.7%
1.5 - 1.8%
Consumer durable loans
1.5 – 2%
Government decisions fuelling the journey of digital payments
Complete payment landscape has changed a lot over the past years, led by government and regulatory initiatives as well as changing consumer preferences.
Jan Dhan, Aadhaar and Mobile (“JAM”), the demonetisation of highvalue currency notes in November 2016, implementation of goods and services tax (“GST”) and the unveiling of the Unified Payments Interface (“UPI”) are some of the notable regulatory initiatives.
Digital payment volumes have quadrupled in the last three years ending fiscal 2019, according to CRISIL Research.
In terms of volume, digital payments transactions have logged a five-year CAGR of 49.0% from fiscal 2014 to fiscal 2019. The figure below depicts the year-on-year increase in digital payments transactions from fiscal 2014 to fiscal 2019, and the expected increase from fiscal 2019 to fiscal 2020.
Note: Digital transactions includes RTGS, but excludes interbank clearing, ECS, NEFT, IMPS, NACH, cards and prepaid instruments
According to CRISIL Research, the digital payments value in India is expected to more than double to Rs. 4,055.0 trillion in fiscal 2024 from Rs. 1,630.0 trillion in fiscal 2019, translating into a five-year CAGR of 20.0%, as depicted in the figure below.
Note: Digital transactions include RTGS – excluding interbank clearing, ECS, NEFT, IMPS, NACH, cards and prepaid instruments
Increasing share of digital channels in domestic payment transactions
The interest of the population has shifted from cost saving to ease of performing transactions.
The share of different channels in domestic money transfer has changed significantly over the past five years. Banks, for example, are witnessing a change in customer behavior, with fewer customers visiting bank branches for transactions. This change in behavior has become more pronounced post-demonetization, with even the usage of ATMs reducing significantly.
The figure below depicts the year-on-year increase in the use of digital transactions and the resulting decrease in the use of non-digital transactions for domestic banking transactions from fiscal 2014 to fiscal 2020.
Note: Digital transactions include RTGS, but excludes interbank clearing, ECS, NEFT, IMPS, NACH, cards and prepaid instruments; Non-digital transactions include cheques/paper clearing and ATM transactions
Credit card industry spends to grow 2.5 times in the next five years
Credit card spends have registered a robust growth, growing at a CAGR of 32.0% from fiscal 2015 to fiscal 2019 to reach Rs. 6.0 trillion as of fiscal 2019, and is expected to grow at a healthy rate to reach Rs. 15.0 trillion as of fiscal 2024, which is 2.5 times over fiscal 2019, according to CRISIL Research. This growth in overall credit card spends is depicted in the figure below.
Growth in credit card spends is volume led
As depicted in the figure below, the number of credit cards issued stands at 47.0 million in fiscal 2019, having grown at a CAGR of 20.0% over the last five years, and is expected to grow by 25.0% from fiscal 2019 to fiscal 2020, while annual average spends per card is expected to grow by approximately 1.0% from fiscal 2019 to fiscal 2020, according to CRISIL Research.
Credit card players use various distribution channels such as Banca (selling to existing bank customers) and the open market to acquire customers.
CRISIL Research estimates that the open market channel accounts for 30.0% of overall sourcing as of fiscal 2019, as depicted in the figure below.
Based on market interactions, issuers such as SBI Card, RBL and Citi Bank have a 40.0% to 50.0% market share of the open market channel while SBI Card is the leader in the open market card holder acquisitions in India due to its strong focus, highest share and scale via this channel of overall sourcing.
Increased originations among millennials in the last four years
The proportion of credit card originations among millennials (persons below 30 years of age) has increased over the last four years from 19.0% in fiscal 2015 to 35.0% in fiscal 2019, and the share of customers below 25 years of age has increased ten-fold from fiscal 2015 to fiscal 2019.
The figure below depicts the breakdown of credit card originations by age group from fiscal 2015 to fiscal 2019.
Credit card dues outstanding to be driven by higher spending and increasing usage of EMI facility
According to CRISIL Research, credit card dues are anticipated to grow at a CAGR of 23.0% to reach Rss 3,313.0 billion as of fiscal 2024.
Going forward, credit card dues is expected to be approximately three times over the next five years ending fiscal 2024, supported by spends growth and increasing EMI-based payments using credit cards.
The figure below depicts the year-on-year growth in credit card dues from fiscal 2015 to fiscal 2019 and the expected growth till 2024.
According to CRISIL Research, credit card dues as a proportion of overall spends is expected to remain stable at approximately 20.0% going forward, with 20.0% to 25.0% of credit card dues currently being converted to EMI.
Headroom for growth given an under-penetrated credit card market
Credit card spending relative to PFCE has significantly increased in recent years. In absolute terms, per-capita PFCE was approximately Rs. 85,000.0 in fiscal 2019, of which only Rs. 4,500.0 comprises spending through credit cards.
Credit card spending accounted for approximately 5.4% of PFCE in fiscal 2019, compared to approximately 2.3% in fiscal 2014.
Going forward, according to CRISIL Research, credit cards spend is expected to grow at a much faster pace than PFCE, and per capital credit card spend as a percentage of per capita PFCE is expected to reach 7.6% by fiscal 2024 as depicted in the figure below.
Note:PFCE is based on current prices
As depicted in the figure below, traditionally, credit card penetration in India (i.e. average number of cards per 100 people) is relatively low in comparison with other countries.
Note: Credit card penetration is average number of cards per 100 people, For Japan, credit card penetration is of 2016
As depicted in the figure below, credit card spends as a percentage of GDP growth in calendar year 2017 is in line with credit card penetration in India.
Demonetization was an inflection point for the credit card industry which led to high incremental growth in card issuances and thereby a rise in penetration.
The figure below depicts the year-on-year percentage increase in credit card penetration in India from fiscal 2014 to fiscal 2019.
Note: Credit card penetration is average number of cards per 100 population
Growth from NTC customers
NTC customers are defined as those who get their bureau record for the first time. The number of NTC customer originations in credit cards has increased at a CAGR of 20.0% to reach approximately 3.0 million as of fiscal 2018 in the last three years. Going forward, according to CRISIL Research, this trend is expected to continue.
Organized retail penetration (including e-commerce) to increase
Organized retail penetration has grown from 5.6% in fiscal 2009 to 10.6% in fiscal.
According to CRISIL Research, organized retail penetration is expected to grow to approximately 15.0% in fiscal 2024, as depicted in the figure below.
Continuous improvement in payment infrastructure
Payment infrastructure includes POS terminals and payment gateways which facilitate online payments. The number of POS terminals has grown at a CAGR of 29.0% from fiscal 2015 to reach 3.7 million terminals in fiscal 2019, as depicted in the figure below.
This growth has been largely driven by demonetization, ‘Digital India’ initiatives and rising organized retail penetration
The rise in e-commerce penetration has also led to online-payment facilitators (also called payment gateways), such as Razorpay, PayU, and CCAvenue, who integrate payment process on the platform of online merchants.
MDR to online merchants charged is approximately 2.0% per transaction for payments through debit cards, credit cards, and net banking options, among others.
In terms of credit cards, this improvement in infrastructure has led to a CAGR of 28.0% in volume of transactions to reach 1.7 billion swipes in fiscal 2019, as depicted in the figure below.
According to CRISIL Research, as of fiscal 2019, debit card penetration in India is 65.0% which shows high potential for players to cross sell credit cards, given that credit card penetration is 3.0% as of fiscal 2019.
Players like ICICI, SBI Card, Kotak, and Axis also offer secured credit cards against fixed deposits (“FD”). Customers with lower salaries, relatively inferior credit scores, or no regular income can avail this option where they get a credit limit of 80.0% to 85.0% of the value of the FD.
Profitability to remain strong in credit cards
Credit card profitability currently stands at 3.5% as of fiscal 2019, as depicted in the figure below.
Overall income to slightly increase over the next 2 to 3 years
The credit card business is based on two major revenue streams: fee income and interest income. The figure below depicts the breakdown between fee income and interest income as part of the revenue stream as of fiscal 2019
Credit costs to slightly rise due to focus on smaller geographies
Delinquency (90 plus days) levels has reduced in the last couple of years. This can be attributed to increasing data availability and improved card payment habits as customers are becoming aware of the cost of carrying large balance.
|Total Income||Total Expenses||PAT for theYear||Total Assets||Borrowings(Other than Debt Securities)|
|31 March 2017||3,471.04||2,899.42||372.86||10,764.99||219.74|
|31 March 2018||5,370.19||4,450.85||601.14||15,686.00||7,467.8|
|31 March 2019||7,286.83||5,955.24||862.72||20,239.63||8,374.41|
30 Sept 2018
30 Sept 2019
|Basic EPS (₹)||RoNW(%)|
|31 March 2017||4.75||26.00|
|31 March 2018||7.40||25.00|
|31 March 2019||9.43||24.00|
The table below summarizes and compares the operating parameters of key players in the credit card industry.